American Tax Relief Act of 2012: Portability of Applicable Exclusion Amount Between Spouses

By: Stefanie L. Pate, Esq.

On January 1, 2013, Congress passed the American Tax Relief Act of 2012 (“ATRA”). One key provision of ATRA was to make permanent the portability of the applicable exclusion amount between spouses (“Portability”). The applicable exclusion amount is the amount any U.S. Citizen can transfer at death free of federal estate tax. Under current law, amounts transferred during life or at death above the applicable exclusion amount is taxed at forty percent (40%).

The applicable exclusion amount for 2014 is $5.34 million. Portability permits the first spouse to die to transfer his or her unused applicable exclusion amount to the surviving spouse for his or her gift and estate tax purposes. This transferred amount is known as the Deceased Spousal Unused Exclusion Amount (“DSUEA”).

The DSUEA is only available to the surviving spouse if a timely election is made on the deceased spouse’s federal estate tax return. This election is irrevocable. The estate of the first spouse to die will incur the cost of preparing and filing the federal estate tax return.

Estate planning opportunities do exist to take advantage of Portability. If you would like to learn more about the implications of Portability or are considering a possible refinement to your current estate plan, Leech Tishman is happy to discuss available options with you.

Stefanie L. Pate is an associate and practices in Leech Tishman’s Estates & Trusts Practice Group. She can be reached at 412.261.1600 x 431 or you have any questions regarding portability or any other estates & trusts issue, please feel free to contact Leech Tishman’s Estates & Trusts Practice Group. To read more about Leech Tishman’s Estates & Trusts Practice Group, please click here.

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